GEF and CDM/JI: similarities, differences, linkages, synergies GEF Training Workshop, Almaty, October 6-9, 2004

How your GEF experience can help in the world of carbon finance UNFCCC and Kyoto Protocol, GEF and flexibility mechanisms Project-based mitigation: similarities and differences Linkages and synergies between UNDP/GEF and CDM/JI projects “Green Investment” Schemes

UNFCCC, Kyoto Protocol and their mechanisms UNFCCC, its objectives GEF – financial mechanism of UNFCCC Kyoto Protocol Kyoto Mechanisms – CDM (Art. 12), JI (Art. 6), IET (Art.17) Project-based mechanisms and cap-and- trade; fungibility RBEC countries and KM – experience to date

GEF and CDM/JI projects: similarities Objectives: reduction/avoidance of GHG emissions Incrementality and additionality National priorities, national approval: OFP, DNA GEF and CDM – participatory preparation Project documentation – uniform formats

UNDP/GEF and CDM/JI projects: similarities (contd.) Incremental costs, baseline assessment/GHG reduction costs M&E and M&V STAP and CDM validation CDM/JI – incorporate GEF methodologies and experience Public and private participation

UNDP/GEF and CDM/JI projects: differences Transfer of emissions reductions, additional revenue stream Public vs. private CER and ERU price – market driven, more or less than “incremental costs” “Market transformation” vs. ring-fenced quantifiable reductions 2-party national approval/acceptance, international approval (CDM EB) Accredited validators (CDM)

UNDP/GEF and CDM/JI projects: differences (contd.) Registration requirements CDM – international certification (EB) Institutional – new approval authorities GHG assessment under KM – more detailed, more rigorous, more formulaic M&V plans and protocols (audits)

Linkages and synergies GEF intervention improves enabling environment for CDM and JI – policies, awareness, market conditions GEF helps to create capacity for development of CDM and JI projects GEF fosters national review/approval and stakeholders participation GEF projects – CDM/JI replication? Carbon accounting Co-financing? Parallel? …?

CO UNDP/GEF experience – pathway to the CDM/JI world? Access to government agencies – CDM/JI authorities Contacts with project proponents, pipeline of project ideas/proposals Knowledge of the country economy and development priorities and trends, contacts with public sector buyers Project development experience/capacity, including participatory

CO “value added” and possible roles CDM/JI stampede – why join? Why UNDP CO – project sponsors and investors, sellers and buyers prospective: project development, finance, else? Why UNDP CO – government prospective Possible roles: facilitation, capacity building (government, project developers, stakeholders), participation, advocacy Country circumstances, RBEC experience to-date What can be done now? Capacity/infrastructure for CDM/JI? GEF role? Sources of funds and revenue models

“Green Investment” Schemes AAU trading – possible economic growth constraints (deflation of “hot air” bubble) AAU trading – pressure to demonstrate further GHG reduction commitment AAU trading reserve AAU trading – long-term considerations (beyound the first budget period)

“Green Investment” Schemes – contd. Advance sale of AAUs with reinvestment of proceeds in projects (JI-like) and replenishment of AAUs Clear criteria and procedures Financial intermediation – new mechanisms, existing environmental funds (debt-for-nature)

“Green Investment” Schemes – contd. Bundling of small project, GHG reduction portfolios GEF connection/parallels: joint mechanism, umbrella financing, revolving fund experience Possible applications for CDM –PCF Central American RE Fund experience